Comerica Economic Weekly, January 4, 2019

Robert A. Dye, Ph.D.


Daniel Sanabria

Macro shot of a line graph on a blue background

Worries about a cooler Chinese economy and Apple's related downgrade of its 2019 sales forecast dominated financial news this week.

Worries about a cooler Chinese economy and Apple’s related downgrade of its 2019 sales forecast dominated financial news this week. Then the whale of a jobs report for December surfaced Friday morning.

The Caixin China General Manufacturing Index for December fell to 49.7, just below the 50 break even mark, indicating slightly deteriorating conditions there. Other consumer-related metrics for China appear to be weakening as well. A significant slowdown in China’s “real” economy would come with spillover effects for its key trading partners as well as for financial markets globally. 

The surprising BLS jobs report for December showed a robust net gain of 312,000 new jobs for the month. November and October payrolls were revised up by 58,000 jobs. The average work week for December increased from 34.4 to 34.5 hours. Average hourly earnings increased by 11 cents or 0.4 percent from November and were up by 3.2 percent over the previous 12 months, a new high for this cycle. The unemployment rate ticked up to 3.9 percent with a large increase in the labor force. The very strong official BLS payroll data was corroborated by a strong ADP Report for December that showed a net gain of 271,000 private-sector jobs for the month. 

If the partial federal government shutdown extends deep into next week we could see a significant drag on January payroll totals.

Initial claims for unemployment insurance increased by 10,000 for the week ending December 29, to hit a still-low 231,000. It looks like the series is lifting after its September low. Continuing claims increased by 32,000 for the week ending December 22, to hit 1,740,000.

Mortgage applications fell at year end. This is non-seasonally adjusted data, so we expect to see mortgage apps tail off over the holidays. Purchase apps were down 7.6 percent for the week ending December 28, their third consecutive weekly decline. Refi apps fell 10.6 percent for the week, also the third consecutive decline. Year-over-year comparisons look better. On a four-week moving average basis, refi apps were down 32.5 percent from a year ago, purchase apps were essentially unchanged from a year ago. According to the Mortgage Bankers Association, the rate for a 30-year fixed-rate mortgage eased in late December to 4.84 percent, down 33 basis points from early November.

The ISM Manufacturing Index for December fell to a still-positive 54.1, down from November’s 59.3. The new orders sub-index fell sharply, down from a strong 62.1 in November, to a barely positive 51.1 in December. Production eased from a strong 60.6 in November, to 54.3 in December. Eleven out of eighteen industries reported expansion in December. The six industries reporting contraction were printing, fabricated metals, nonmetallic minerals, petroleum, paper and plastics. Anecdotal comments were led by “Growth appears to have stopped”. The report implies an inflection point for the manufacturing sector, not contracting overall, but clearly less positive than it was last summer. 

Construction spending data for November was not released this week as scheduled, due to the federal government shutdown which has halted updates to the Census Bureau’s website. International trade and factory orders for November may not be released next week as scheduled if the shutdown continues through the week.  The BLS website is functioning through the shutdown.

For a PDF version of this report, click here:  Comerica Economic Weekly, January 4, 2019

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January 4, 2019
Robert A. Dye, Ph.D., Senior Vice President and Chief Economist at Comerica Bank

Robert A. Dye, Ph.D.

Senior Vice President and Chief Economist
Daniel Sanabria, Senior Economist at Comerica Bank

Daniel Sanabria

Senior Economist

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